There will be challenges initially. There can be hiccups even in most perfect tech but the beauty of a perfect tech is that it removes those hiccups as soon as possible, said Arun JaitleyDeepshikha Sikarwar | ET Bureau | July 01, 2017, 07:47 IST

Arun Jaitley (File photo)Finance ministerArun Jaitley told Deepshikha Sikarwar in an interview that prices should decline after the goods and services tax (GST) is in place July 1, while anticipating some teething troubles. Edited excerpts:

How disruptive will GST be? Some experts as well as economists have suggested a dip in growth.Any change, even a small change in mode of filing a return, is disruptive. I see a minimal disruption in this considering the smooth manner in which most people have already migrated to the GST and some new registrants are joining now. I think in the medium and long term more revenue means more spending by the government. I do not want to get into numbers. No economist told me that oil would be at $40. No one told me that India would grow by more than 7% in the year of demonetisation. People talked of negative growth or growth rate falling to 3%. I do not want to get into their predictions. I believe GST is an efficient and simple system with less corruption.

GST has been in the works for long, but there is still some last-minute confusion. Industry still seems jittery. Software solution providers say they are not ready and have sought more time.Normally in a reform process private sector is ahead of the government. This time the government seems way ahead of the private sector. For an industry association to say postpone it in the face of a constitutional amendment was highly regrettable. There will be challenges initially. There can be hiccups even in the most perfect technology but the beauty of a perfect technology is that it removes those hiccups as soon as possible. This is a reform that is in the interest of the common man, traders, businesses, industry and the whole country. You need to be patient.

West Bengal has sought deferral of GST and the Opposition is planning to boycott the midnight rollout function.Constitution does not permit (postponement of implementation). Every political party should have one position on GST. Either you are for or against it. There is no decision related to this tax that has not been endorsed by any political party. Rates have been decided by consensus. Every state government was party to the decision-making process. If any opposition party has objection to any rate, then it can refund the SGST portion of the state in which its party is in government. This is a ‘saanjhi vyavastha’ (joint mechanism) for the whole country. We have had consultation at every stage of the formulation of the new tax. At the time of constitutional amendment, we incorporated suggestions made by Congress. All bills have been approved by them. Their state governments have passed GST legislations. Finance ministers of the states where their party is in power have participated in the council and agreed to the GST framework.

Will we see prices coming down?On an overall basis, the net weighted average of the whole consumption basket is less than what it was. So, in terms of weighted average, it should come down. Being a more efficient system, GST will check tax evasion. Quantum of tax collection will also go up in the long run.

Will industry pass on the tax benefit to consumer?There is already an inbuilt mechanism of anti-profiteering clause. I hope we do not have to use it. It should act as a deterrent.

There are apprehensions among smaller businesses who form the party’s base. Some are even planning protests.It is not going to be difficult for small business. There will be no tax on neighbourhood mom and pop shops. Those with turnover of up to Rs 20 lakh do not have to pay any tax or register. For those with annual turnover between Rs 20 and Rs 75 lakh you can avail of the composition scheme. In the composition scheme, traders need to pay 1% tax and manufacturers have to pay 2%. Those with turnover above Rs 75 lakh are not that small and must be already availing services of a tax consultant or a CA (chartered accountant) even now.

Every change is opposed by one or other group. I am not so worried about it. The GST Council is a body of elected persons. It is a responsible body. If anyone feels calculations were not correct, they can represent, the council can consider. There is a fitment committee and council has considered more than 60 cases. You can’t expect the council to act under pressure. The argument that I did not pay tax under the old system and there was scope for me to evade taxes, this complaint cannot be entertained.

Traders fear GST will lead to a rise in inspector raj.No, on the contrary, GST will end inspector raj as the person will be replaced by software. If you honestly pay your tax and file your return every month, you may not need to even see you assessing officer. It will be like income tax, where you file online. For businesses, manufacturers, traders there was no financial integration. Every state had their own rates and their own laws. GST integrates it. If you want to transfer goods from one state to another, you had to pay multiple taxes as also file multiple returns. You had to go multiple times to your CA or even meet tax officer. There was scope for corruption, according to people.

Now, there is one tax. You have to take one GSTIN number. People find any new technology challenging. When mobile came, older people found them challenging. If you can’t do it yourself you can ask someone to do it for you. You still go to the CA or tax consultant. After taking the GSTIN, if you sell goods directly to consumers then you have to file one return by the 10th of every month. Just give details of your sales and tax. We have extended this deadline for the first two months. If you sell to businesses then you give a list of who you have sold to with their GSTIN. The software will automatically match files. You do not have to file that return, it will be generated by the software itself. States will assess 90% of small assessees. Those over Rs 1.5 crore it will be divided between states and centre. But you will deal with only one authority.

Experts say multiple tax rates have made the GST very complex.It is not complex. If we had not gone for multiple rates it would have been a conspiracy against the common consumer. Those that write columns don’t have to run the country. It is every easy to say that there should be one rate. If for instance we were to have a single rate of 15% for GST, that would mean even food products that are consumed by poor will face 15%. We have kept food items at zero. We have to see who the consumer is. I had said in Parliament — should a hawai slipper and Mercedes be taxed at one rate?

We adopted two principles while formulating the rate. We took the tax incidence on the day on that commodity or service and put it in the nearest slab it fell in. Secondly, the idea was that the exercise should be a revenue-neutral rate, otherwise government revenues will suffer. Reality is that the weighted average of taxes is lower than total tax incidence. There were a number of items which had a total tax incidence of over 31%, so they were put in 28%. But soaps and toothpaste are common-man items, so the rate on these was consciously brought down to 18%.

In the long run, rates would converge. As the tax base rises, rates would become more reasonable. If tax collection increases, government will have more resources in its hands and would be able to spend more on welfare schemes and infrastructure creation. This would bring significant benefits in the medium and long term. A rise in indirect taxes will also lead to a rise in direct taxes as the old system of pakka and kaccha bills’ (tax paid and nontax paid bills in cash) would end.

Some sectors that were exempted are protesting.No commodity can claim a fundamental right to be exempted forever.

What about petroleum and real estate?We have to see what is the comfort level of the council going forward. We would want petroleum products and realty to come under GST. For that the success of GST is very important.

There is a concern on some states continuing the check post system post GST.As far as the e-way system is concerned, there was no final decision by the GST council. Some more discussions are required. Once we decide the mechanism, we will follow and till then states would be free to carry on with existing system. Many states have their own system but some others do not have it.

Globally there seems a lot of interest in GST implementation by India.You have to see that global growth is yet to recover… Large countries are becoming protectionist themselves. The world accepts that if anyone has shown the potential to carry out structural reforms, it is India. We carried out FDI (foreign direct investment) reforms and we received the largest FDI in the world. The government and Prime Minister have shown that political-level corruption can be ended. Through insolvency ordinance, the government has created a framework that allows for large industrialists to be taken to insolvency proceedings… (On) Air India there had been discussions for decades…The cabinet has taken a decision on it just yesterday.

What is the next step on Air India?A group of ministers has been set up. It will work out (the details).